JERUSALEM—It was one of those contradictions so typical of Israel’s conflict with the Palestinians.

Just as Israelis were mourning the death of three of their soldiers—apparently mistakenly shot by other Israeli soldiers while they were chasing a Hamas terrorist—Israeli security sources made a point of praising the Palestinian Authority for its determined action against Hamas.

Mahmoud Abu Hanoud managed to escape the siege on his home north of Nablus, then received medical treatment at a Nablus hospital before he was turned in to Palestinian police.

Some Israeli policy-makers, like Cabinet minister Amnon Lipkin-Shahak, said Israel should demand Abu Hanoud’s extradition unless the Palestinian Authority puts him on trial. However, despite Israeli praise for the Palestinians’ performance against terrorists, Israel refrained from asking for his extradition. The Palestinian Authority is highly unlikely to turn him over.

Reports say Abu Hanoud is to be tried by a special military tribunal in the next few days.

One reason why the Israelis did not want to push the extradition with the Palestinians is the sensitive stage of peace negotiations—another is that cooperation between the two sides’ security services has never been better.

Last week, both services uncovered a terrorist ring of 23 Islamic activists, reportedly linked to arch-terrorist Osama bin Laden. Last month, another operation resulted in the seizure of an alleged Hamas armory in Nablus, the largest stores of weapons and bomb-making equipment seized in years.

But the Palestinians have their red line. They will not turn their people over to the Israelis. They have rarely done so in the past, despite a specific clause in the Oslo peace accords that terrorists on the wanted list should be extradited after an initial period of detention.

For the time being, the Israelis and the Palestinians have a common goal: keep the area calm until negotiations play out in the next few weeks. At the same time, Palestinian Authority President Yasser Arafat has no interest in antagonizing Hamas just before a possible breakthrough in the negotiations.

Arafat and Hamas have a love-hate relationship. Arafat would like to be rid of the Muslim fundamentalist opposition led by Sheik Ahmed Yassin. Yet Arafat cannot afford confronting Hamas. He can use the implicit threat of fundamentalist terrorist attacks as a tool against Israel in negotiations.

Yassin, too, needs Arafat’s consent for the continued political activities of Hamas in the territories, although he told The New York Times this week that Arafat’s intelligence apparatus had voided 175 attacks against Israeli targets in recent years.

In the years 1994 to 1996, Hamas was responsible for a number of terrorist attacks inside Israel that killed dozens of Israelis. Arafat was unable—or unwilling—to stop Hamas.

Only after former Israeli Prime Minister Benjamin Netanyahu came to power in 1996 -- partially as a result of voter reaction to those attacks—did Palestinian security services take action against Hamas. Under Arafat’s orders, Yassin spent 10 weeks under house arrest in Gaza in 1998.

Hamas has repeatedly threatened to renew terrorist attacks. But the security services of the Palestinian Authority have indeed taken measures against Hamas, and Israelis have learned how to cope better with the terrorist threat. In fact, last weekend’s operation was part of those efforts.

Arafat refrained from clashing head-on with Hamas not only because of politics, but also because of popular feelings. Shortly after the battle was over, dozens of women gathered for a spontaneous support rally for Hamas. The situation could not have been more satisfying to the Palestinians: The Israelis suffered three losses and their target, Abu Hanoud, managed to escape.

Prior to the battle, Abu Hanoud was a village hero. Now, he’s a national Palestinian hero.

“This is a victory for the Hamas and the Palestinian people,” said Ismayil Haniya, one of Hamas’ leaders in Gaza.

Hamas was quick to turn the Israeli mishap into a Hamas victory, mostly because in the past few years, the group has seen a number of failures.

In the past two years, Israel hit, one by one, all the commanders of the military wing of Hamas.

Abu Hanoud was not considered a star fighter. Only the fact that senior commanders had already been taken out of action brought him up on the most-wanted list.

Abu Hanoud was reportedly responsible, among other operations, for planning the 1998 suicide bombing of Jerusalem’s Mahane Yehuda market and Ben Yehuda pedestrian mall, and other attacks in which 20 Israelis were killed.

He was also in charge of recruiting four Israeli Arabs in September 1999 to bomb two buses in the Israeli towns of Haifa and Tiberias.

In the past, Yassin had hinted that his organization would consider a “truce” with Israel if it returned to the 1967 borders and released all Palestinian prisoners. However, in the recent interview with the Times, he said the offer was now void because Israel had rejected it.

Another reason for Hamas’ enhanced terrorist activity is mounting pressure on the organization to kidnap Israeli soldiers as a bargaining chip for its own imprisoned militants.

One Islamist activist was quoted in the Hamas Web site that, “the Islamic movement will have to do something to give our prisoners hope.”

Arafat, he wrote, “doesn’t represent us, and he doesn’t give a damn if our brothers remained in Zionist jails for 30 years to come.” He concluded, “We have to do something.”

Recent Hamas setbacks, and the restraint forced upon Hamas by the Palestinian Authority, may not last long. If negotiations collapse, Arafat may give Hamas the green light to operate.

A roadside bomb, discovered by chance and detonated near a populated neighborhood in Jerusalem on Sunday night, was an indication that the fight against Islamic fundamentalist terror is far from over. The threat exists. Consequently, operations like last weekend’s terrorist chase will continue, despite the potential heavy price.